IN its 75th year, SAA is engaged in a life and death struggle and, with its debts exceeding its equity by 10%, fears have been expressed of the implications of a technical insolvency (similar to that of 2004 when a R6bn hedging loss effectively wiped out the airline’s share capital) during the darkening global outlook for airlines.
Kaushik Patel, SAA’s cfo, writing in Business Day of March 2 says despite the airline having received a total injection of R8,5bn of taxpayers’ money since the 2004 crisis, SAA remains undercapitalised and is now in a debt trap. SAA has one of the highest debt-to-turnover ratios in the world: 110% (compared with Cathay Pacific+-67%, Lufthansa +-23%, Qantas +-47%, BA +-43%, SIA +-27%, Air Canada +-63%).
At a parliamentary portfolio committee on February 18, it was revealed that SAA originally requested R5,2bn in capital from government for the purposes of dealing with the Voyager miles liability on its balance sheet and to take up the Airbus contract to avoid being sued by the manufacturer. But a promise of only R1,56bn was secured from treasury.
SAA will need aircraft to capitalise on the opportunities of the 2010 World Cup and its current balance sheet hampers its ability to seek funding.
Dr Andrew Shaw, ddg Transport of the Department of Public Enterprises, told the February 18 portfolio committee that SAA’s restructuring had failed in certain respects.
He listed these failures, saying SAA had not achieved its target for the spinning off or selection of strategic equity partners for Voyager, SAA Technical, Air Chefs or a separate freight division. Nor had revenue management targets been met.
SAA chairman Prof. Jakes Gerwel, told the committee he deplored the national propensity to regard the airline in a negative light when SAA was in fact doing well in a global context.
